A panel of Florida LBM experts described on Thursday a turbulent present and moribund future for the Sunshine State's construction supply industry. They decried price-slashing competitors, fretted over the economy, castigated the federal government, and predicted it could take anywhere from nine to 36 months before conditions in the state show marked improvement.
The freewheeling, often salty, colloquium in Kissimmee, Fla., helped mark the first full day of the Florida Building Material Association's annual Main Event and Gulf Atlantic Building Products Expo. Spike Cissel, president of Jacksonville, Fla.-based Manning Building Supplies, said his company's sales per start had risen in recent years but added: "We're kind of still swirling around the bowl post-flush." And Brad Wanzenberg, VP of Deerfield Builders Supply in Deerfield Beach, Fla., said that while the coastal nature of his company's clientele might have made conditions for his firm a bit better than that of his counterparts in Florida's interior, it's still no picnic. He said his customer base might have more money, "but they sure know how to find bargains."
Florida has the fifth-highest unemployment rate and sixth-highest foreclosure rate in the nation, according to the latest statistics.
"There is no recovery yet," declared Juan Quesada, president of Tibbetts Lumber, a two-year-old, four-yard operation that's been assembled in large part from facilities and staff that used to work at Cox Lumber, the former No. 1 dealer in Florida and property of Linton Tibbetts. But he quickly added: "For us, it doesn't matter, because we started from zero, so every month is better than it was before."
Andrew Goodman, president and CEO of Sherwood Lumber, said that, speaking nationally, "we're not anywhere closer" to a recovery than the LBM industry had seen a few years ago. "In fact, we may be even more in trouble today," he added, citing declines in dealer equity and revenue and the large number of homeowners with mortgages bigger than their houses are worth on today's market.
Relatively less gloomy was Chuck Parliment, owner of Parliment Building Products, a wholesaler based in Jacksonville, Fla. He said he's seen some improvement among folks "who decided they didn't want to participate" in the housing recession, adding: "We are optimistic that things are improving slowly."
Both Quesada and Cissel said dealing with big, multistate LBM competitors constituted a major challenge for them, primarily because those other companies sell at prices that the two veteran dealers regard as suicidally low. They didn't name names, but small dealers frequently include companies like ProBuild, Builders FirstSource, Stock Building Supply, and 84 Lumber on their list of troublemakers.
Quesada said he sees "desperate competitors doing foolish things" that depart from smart business practices. Cissel said he believes there probably are more dealers in Florida than the state can support today, remarking that "price-cutting SOBs ... is a component of life that needs to go away." And neither bought the argument that big national builders, with their constant jawboning for cheaper products and requests for "transparent pricing," deserved all the blame for what they regard as cutthroat bids.
"The national builders aren't the problem. It's the level of stupidity in our industry," Quesada said.
Aside from that evergreen issue of big vs. small competitors, the panelists cited several other challenges in the year ahead. Among them were dealing with the rising costs of fuel and insurance, stifling the urge to add people or expenses before the economy recovers, finding good staff, and building up financial resources at a time when banks are stingy.
Parliment and Goodman rang out in harmony on the issue of extending credit to dealers. "As people grow, they're going to need more credit," Parliment said, "and it's a real challenge for us to decide" who will deserve bigger terms. He said lots of options could be explored in the future, including creating a new billing category in which debts have to be paid within 10 days. And David Randich, president of Therma-Tru Doors, said his company spends as much time "looking at our vendors to see who will stay in business" as it does focusing downstream on dealers' financial strength.
There was little love in the meeting room for the federal government, particularly when the session's moderator, Ro-Mac Lumber president Don Magruder, asked panelists to name a regulation or two that they'd abolish if they could be king for a day. Randich and Quesada called for tax code reforms. Wanzenberg said he wouldn't mind seeing any of a couple of dozen of Environmental Protection Agency regulations get trashed, but for that day he chose the EPA's rule governing renovations in homes that could contain lead paint. "I don't thnk everybody knows how crippling the rule will be" to remodelers, an important market for dealers, Wanzenberg said.
Cissel and Jay Landem, VP and regional manager of HB&G Building Products, called for federal measures to spur housing demand. Parliment wanted to reduce jobless benefits as a way to encourage people off the dole, and he wouldn't mind term limits for Congress as well.
"Congress is there too damn long," he declared.
Along with the panelists already cited, the other participants were Rodney Hershberger, CEO of PGT Industries, and Greg Stine, development director of BuilderLink.
(Editor's Note: This reporter also was part of the panel, but his comments were not included in the story because he was there largely to provide national perspective to Florida issues.